The week so far has seen some signs that the upward momentum to the US dollar is waning. This was evident though most of yesterday’s session and although we’ve seen some recovery overnight, it’s not been sufficient to overcome yesterday’s losses. The dollar has been rising pretty relentlessly for the past 6 weeks and the market having largely priced in a move from the Fed, there is not much more juice to be squeezed from that view. Note that Fed Chair Yellen speaks later today at 17:25 GMT, with the Fed’s Beige book released this evening. The focus is now turning to what sort of indication the Fed will give for rates in 2016, with Fed dove Evan’s speaking overnight and suggesting that rates would rise only modestly next year.
Showing some resilience overnight has been the Aussie, with GDP data proving to be stronger than expected at 0.9% in the third quarter. This comes after recent comments from RBA Governor Stevens who suggested we should all ‘chill’ over the New Year period before re-assessing the data. This has forced the market to scale back expectations for further easing next year, but it’s still priced as a risk and if this is taken out in the coming weeks, then there is further scope for Aussie gains in the early part of next year. For today, we see ADP data in the US which gives some sense of the Friday payrolls release, whilst the Bank of Canada rate decision at 15:00 GMT is expected to see rates remain on hold.
Further reading:
GBP/USD: Trading the British Services PMI
EUR/USD: The 2 Key Levels To Watch – SocGen, Credit Suisse
